Pacific Gas & Electric Co. v. Federal Energy Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 20, 2008 Decided July 22, 2008

No. 05-1401

PACIFIC GAS AND ELECTRIC COMPANY,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

CALIFORNIA ELECTRICITY OVERSIGHT BOARD, ET AL.,

INTERVENORS

Consolidated with

06-1422

On Petitions for Review of Orders of the

Federal Energy Regulatory Commission

Frank R. Lindh argued the cause for petitioner. With him

on the briefs was Keith T. Sampson.

Lona T. Perry, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. With her on the

brief were Cynthia A. Marlette, General Counsel, Robert H.

Solomon, Solicitor, and Beth G. Pacella, Senior Attorney.

2

Wallace LaMar Duncan, Sean M. Neal, and Derek Anthony

Dyson were on the brief for intervenor Modesto Irrigation

District.

Before: TATEL, GARLAND, and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge: Pacific Gas & Electric Company

(PG&E) petitions for review of Federal Energy Regulatory

Commission (FERC) orders that require the California

Independent System Operator, rather than Participating

Transmission Owners like PG&E, to conduct interconnection

studies when a new electric generator seeks to interconnect with

the electric transmission grid. PG&E contends that the orders

violate § 206 of the Federal Power Act. But PG&E’s petition,

while cloaked in the guise of a challenge to the orders below, is

in fact an impermissible collateral attack on a series of orders

that FERC issued in 2003 and 2004. We therefore dismiss the

petition for review.

I

In its Order No. 888, FERC laid the foundation for the

development of competitive wholesale power markets by

requiring public utilities to offer nondiscriminatory open access

transmission services. Transmission Access Policy Study Group

v. FERC, 225 F.3d 667, 680-81 (D.C. Cir. 2000), aff’g

Promoting Wholesale Competition Through Open Access

Nondiscriminatory Transmission Services by Public Utilities,

Order No. 888, FERC Stats. & Regs. ¶ 31,036, 61 Fed. Reg.

21,540 (1996). The Order required all transmission-owning

utilities to provide access to their transmission lines to any entity

generating or purchasing electricity in the interstate market on

the same terms as the utilities use their own lines. Id. at 681. To

3

effectuate this reform, “FERC adopted a pro forma Open Access

Transmission Tariff (OATT), containing minimum terms and

conditions for non-discriminatory service, which every

transmission-owning public utility must file with the

Commission and by which it must abide in providing

transmission services to itself and others.” Id. at 727.

As one means of complying with Order No. 888, FERC

encouraged public utilities “to participate in Independent System

Operators (ISOs).” California Indep. Sys. Operator Corp. v.

FERC, 372 F.3d 395, 397 (D.C. Cir. 2004). As we have

explained:

An ISO conducts the transmission services and

ancillary services for all users of such a system,

replacing the conduct of such services by the system

owners -- that is, the integrated electric utilities whose

market power FERC was attempting to control by

encouraging the creation and operation of the ISOs. In

order to accomplish that purpose, FERC deems it

crucial that an ISO be independent of the market

participants so that decisions of policy, operation, and

dispute resolution be free of the discriminatory impetus

inherent in the old system.

Id. (citing Order No. 888, FERC Stats. & Regs. ¶ 31,036, at

31,731). The California electric power industry responded in

part by restructuring its market and establishing the California

Independent System Operator (“California ISO” or “CAISO”).

See Pacific Gas & Elec. Co., 81 F.E.R.C. ¶ 61,122, at 61,435-36

(1997).

In the period immediately after the Commission issued

Order No. 888, FERC monitored one element of open access

transmission service -- interconnection agreements between

4

operators of generators and transmission facilities -- on a case-

by-case basis. National Ass’n of Regulatory Util. Comm’rs v.

FERC (NARUC), 475 F.3d 1277, 1279 (D.C. Cir. 2007). In its

1997 proceedings regarding the establishment and

implementation of the California ISO, for example, the

Commission considered, inter alia, whether “Participating

Transmission Owners [PTOs] should have the exclusive right to

perform Facilities Studies” necessary for interconnection, or

whether the California ISO should “be made the coordinator for

all expansion projects,” including any necessary studies. Pacific

Gas & Elec. Co., 81 F.E.R.C. at 61,487-88. At that time, the

Commission concluded that the PTOs should retain

responsibility for performing such studies. Id. at 61,489.

The case-by-case approach, however, produced an

increasing number of interconnection-related disputes, and, in its

Order No. 2003, FERC concluded that this approach was “an

inadequate and inefficient means to address interconnection

issues.” Standardization of Generator Interconnection

Agreements and Procedures, Order No. 2003, 104 F.E.R.C. ¶

61,103, at ¶ 10 (2003). “In the interests of achieving

transparency and preventing transmission facility owners from

favoring affiliated generators over independents in

interconnection,” the Commission decided to “require all

transmission facilities to adopt a standard agreement for

interconnecting with generators larger than 20 megawatts.”

NARUC, 475 F.3d at 1279. FERC’s Order No. 2003 series

required all public utilities that own, control, or operate facilities

used for transmitting electricity in interstate commerce to file

revised open access transmission tariffs that include pro forma

Large Generator Interconnection Procedures and a pro forma

Large Generator Interconnection Agreement, unless the

Commission approved a utility’s request for a regional variance

from the standard terms. Order No. 2003, 104 F.E.R.C. at ¶¶ 2,

26.

5

Among other things, Order No. 2003’s pro forma

procedures address interconnection studies, which are performed

to evaluate a proposed interconnection in detail, identify any

adverse system impacts, and specify any facility modifications

needed to complete the interconnection safely and reliably. Id.

at ¶ 36. The procedures provide that the interconnection studies

will “be performed by, or at the direction of, the Transmission

Provider.” Id. In California, the Transmission Provider is the

California ISO, which exercises operational control over the

facilities owned by the California PTOs, including PG&E,

Southern California Edison Company, and San Diego Gas &

Electric Company. See California Indep. Sys. Operator Corp.,

112 F.E.R.C. ¶ 61,009, at 61,022 (2005) (“First Order on

Review”); PG&E Br. 16, 57. In its orders on rehearing of Order

No. 2003, FERC clarified various aspects of the pro forma

procedures, including the requirement that interconnection

studies be performed by the Transmission Provider. See

generally Order No. 2003-A, 106 F.E.R.C. ¶ 61,220 (2004);

Order No. 2003-B, 109 F.E.R.C. ¶ 61,287 (2004); Order No.

2003-C, 111 F.E.R.C. ¶ 61,401 (2005). This court upheld the

Order No. 2003 series against an unrelated challenge in NARUC,

475 F.3d 1277.

PG&E submitted its initial Order No. 2003 compliance

filing in January 2004, and made an amended filing to comply

with Order Nos. 2003 and 2003-A in January 2005. It submitted

its Order No. 2003-B compliance filing in February 2005. See

First Order on Review, 112 F.E.R.C. at 61,022. Those filings

proposed that, instead of having the Transmission Provider

conduct the interconnection studies, each affected PTO would

continue to conduct the studies in its own service territory. Id.

at 61,028. In its First Order on Review, FERC rejected that

proposal. “With each affected PTO conducting system studies,”

FERC said, “a generator could be required to coordinate and pay

for studies conducted by all three PTOs instead of having one

6

set of studies that would examine the effect of the

interconnection and additional generation on the CAISO grid as

a whole.” Id. FERC was concerned that, if “the interconnecting

PTO continues to conduct the studies, there is a risk that

separate transmission investments will work at cross-purposes

and possibly even hurt reliability.” Id. It also declared that

“allowing the PTOs to conduct the studies undermines the very

independence on which the Commission relies.” Id. FERC

therefore held that “CAISO must adopt a centralized study

process, in which CAISO itself conducts the studies.” Id.

In subsequent orders, the Commission held that the PTOs

may participate in the interconnection studies and retain review

and recommendation rights, but that they generally may not

conduct the studies or retain consent rights over them. See

California Indep. Sys. Operator Corp., 112 F.E.R.C. ¶ 61,231,

at 62,136-37 (2005) (“Second Order on Review”); California

Indep. Sys. Operator Corp., 115 F.E.R.C. ¶ 61,237, at 61,873-74

(2006) (“Third Order on Review”); California Indep. Sys.

Operator Corp., 117 F.E.R.C. ¶ 61,148, at ¶¶ 60-71 (2006)

(“Fourth Order on Review”). The Commission again repeated

its concern that “CAISO must manage its . . . system study

process so that an interconnecting generator is not unduly

burdened by coordinating multiple studies with the PTOs.”

Second Order on Review, 112 F.E.R.C. at 62,136. And it

rejected PG&E’s claim that, in requiring the California ISO

rather than the PTOs to perform the interconnection studies, the

Commission violated Federal Power Act § 206. FERC

concluded that this claim was, among other things, “an

impermissible . . . collateral attack on Order No. 2003.” Third

Order on Review, 115 F.E.R.C. at 61,874; see Fourth Order on

Review, 117 F.E.R.C. at ¶¶ 69-70.

PG&E now seeks review of FERC’s First through Fourth

Orders.

7

II

PG&E contends that the orders below, which require that

the California ISO rather than the PTOs must perform

interconnection studies, violate § 206 of the Federal Power Act

because FERC did not first find that the then-existing practice,

in which PTOs performed the studies, had become “unjust,

unreasonable, unduly discriminatory or preferential.” 16 U.S.C.

§ 824e(a); see Atlantic City Elec. Co. v. FERC, 295 F.3d 1, 10

(D.C. Cir. 2002). FERC responds that the requirement that the

ISO perform the studies was first announced not in the orders

below, but rather in the Order No. 2003 series, which PG&E did

not challenge on that ground. FERC contends that PG&E’s

petition is therefore foreclosed because it is a collateral attack on

the Order No. 2003 series.

Section 313(b) of the Federal Power Act permits a party to

obtain review of a FERC order in this court by filing a petition

within sixty days after the Commission’s denial of rehearing. 16

U.S.C. § 825l(b). We have repeatedly held that the sixty-day

limitations provision is jurisdictional. Williston Basin Interstate

Pipeline Co. v. FERC, 475 F.3d 330, 334 (D.C. Cir. 2006)

(citing Nephi, Utah v. FERC, 147 F.3d 929, 933-34 (D.C. Cir.

1998)); Sacramento Mun. Util. Dist. v. FERC, 428 F.3d 294,

298-99 (D.C. Cir. 2005); cf. Georgia Indus. Group v. FERC, 137

F.3d 1358, 1363-64 (D.C. Cir. 1998) (discussing the Natural Gas

Act’s parallel limitations provision). With few exceptions, a

challenge made outside of the statutory period is a collateral

attack over which we have no jurisdiction. See Sacramento

Mun. Util. Dist., 428 F.3d at 299.1

1

One such exception applies when an order is not final because

it leaves an issue contingent on subsequent compliance proceedings.

See Louisiana Pub. Serv. Comm’n v. FERC, 522 F.3d 378, 398 (D.C.

Cir. 2008). PG&E does not assert that FERC’s decision in the Order

8

In Order No. 2003, FERC ruled that, as part of the pro

forma interconnection procedures, “Interconnection Studies

[are] to be performed by, or at the direction of, the Transmission

Provider.” Order No. 2003, 104 F.E.R.C. at ¶ 36. Order No.

2003-A reiterated this requirement, affirming that, for facilities

under the operational control of an ISO, “Interconnection

Studies and transmission planning remain the providence of the

Transmission Provider.” Order No. 2003-A, 106 F.E.R.C. at ¶

785. And Order No. 2003-B made it clear that the “ISO

conducts all studies . . . and controls all aspects of the

interconnection process.” Order No. 2003-B, 109 F.E.R.C. at ¶

80 n.25. Because the plain language of these orders requires

that interconnection studies be performed by the Transmission

Provider, and because PG&E agrees that the California ISO is

the Transmission Provider in California, see PG&E Br. 16, 57,

we conclude that it was the Order No. 2003 series that

announced the requirement that the ISO is required to perform

the studies.

If PG&E objected to that requirement, it therefore had to

petition for review in this court no later than sixty days after

December 20, 2004 -- the date the Commission issued Order No.

2003-B, which was the last order on rehearing that addressed the

requirement. Cf. Louisiana Pub. Serv. Comm’n v. FERC, 522

F.3d 378, 398 (D.C. Cir. 2008) (holding that non-conditional

FERC orders are ripe for review notwithstanding the expectation

that there will be subsequent compliance proceedings);

Wisconsin Pub. Power Inc. v. FERC, 493 F.3d 239, 266 (D.C.

Cir. 2007) (same). PG&E did not file such a petition. Thus,

PG&E’s effort to challenge the centralized study requirement

through its current petition appears to be a time-barred collateral

attack over which we have no jurisdiction.

No. 2003 series was conditional, and we do not think it was.

9

III

PG&E offers two principal reasons why its challenge to the

requirement that the ISO perform interconnection studies is not

an impermissible collateral attack on the Order No. 2003 series.

We address each argument in turn.

1. PG&E first invokes -- albeit obliquely -- the exception

to the sixty-day limitations provision that permits a late

challenge to a Commission rule if the order that established it

did not give a party “‘sufficient notice’ of the rule to which [it]

now objects.” Southern Co. Servs., Inc. v. FERC, 416 F.3d 39,

44-45 (D.C. Cir. 2005) (quoting, inter alia, Dominion Res., Inc.

v. FERC, 286 F.3d 586, 590 (D.C. Cir. 2002)); see Sacramento

Mun. Util. Dist., 428 F.3d at 299. PG&E argues that, “[a]t most

the various notices and orders in the rulemaking docket

appeared to assume that the ‘Transmission Provider’ would

conduct system studies and construct any needed facilities.”

PG&E Br. 57 (emphasis added). “[S]tatements of this kind,” it

insists, “do not constitute fair notice that in California -- where

the California ISO is the ‘Transmission Provider’ -- the

Commission intended to have the Participating Transmission

Owners relinquish their longstanding responsibility for

interconnection studies.” Id.

As we noted in Part II, Order No. 2003 states that

“Interconnection Studies [are] to be performed by, or at the

direction of, the Transmission Provider.” Order No. 2003, 104

F.E.R.C. at ¶ 36. And Order No. 2003-A repeats the point,

stating that, “while the Transmission Owner is a necessary part

of interconnecting to a facility under the operational control of

an . . . ISO, . . . Interconnection Studies . . . remain the

providence of the Transmission Provider.” Order No. 2003-A,

106 F.E.R.C. at ¶ 785. The suggestion that these statements did

not provide adequate notice of the requirement that

10

interconnection studies must be run by the California ISO rather

than the PTOs is belied by PG&E’s concession that, “[b]y its

literal terms, Order No. 2003 required that the ‘Transmission

Provider’ perform interconnection studies,” PG&E Br. 16,

coupled with its recognition that, “in California[,] . . . the

California ISO is the ‘Transmission Provider,’” id. at 57; see id.

at 16; Joint Compliance Filing at 3 (J.A. 54); Revised Joint

Compliance Filing at 3, 14 (J.A. 84, 95).2

The inadequate notice contention is also belied by the

compliance filings made in the proceedings below. Those

filings conceded that the pro forma procedures require that

interconnection studies be performed by the Transmission

Provider -- i.e., the ISO -- and that PG&E and the other PTOs

would need a variance from those procedures to permit the

PTOs to perform the studies. See Revised Joint Compliance

Filing at 18 (J.A. 99) (noting that the parties had “revised the

FERC pro forma [agreement]” with respect to the roles of the

ISO and the PTOs); Revised CAISO Compliance Filing at 17

(J.A. 123) (“With regard to the ISO Controlled Grid, the ISO is

the Transmission Provider, but not the Transmission Owner.

Thus, the [pro forma interconnection procedures] necessarily

2

Because the Order No. 2003 series defined the term

“Transmission Provider” to “include[] the Transmission Owner as

well,” Order No. 2003, 104 F.E.R.C. at ¶ 75; see Order No. 2003-A,

106 F.E.R.C. at ¶ 84, it might be argued that Order Nos. 2003 and

2003-A permit PTOs, as well as the ISO, to perform interconnection

studies. PG&E did not make this argument before the Commission,

and, in this court, it agrees that the Transmission Provider in

California is CAISO. We therefore do not consider the argument. See

16 U.S.C. § 825l(b) (“No objection to the order of the Commission

shall be considered by the court unless such objection shall have been

urged before the Commission in the application for rehearing unless

there is reasonable ground for failure to do so.”); California Dep’t of

Water Res. v. FERC, 306 F.3d 1121, 1125 (D.C. Cir. 2002).

11

must be changed to reflect the respective roles of the ISO and

the PTOs in the provision of Interconnection Service.”); see id.

at 22, 24 (J.A. 128, 130) (proposing a number of modifications

to the pro forma procedures necessary “to adapt them to the

ISO’s circumstances,” including that the PTOs conduct the

studies in the first instance).3

Indeed, by the time this case reached oral argument, PG&E

no longer claimed that the Order No. 2003 series had failed to

put it on notice that ISOs in general would have to conduct the

studies. See Oral Arg. Recording at 12:57-13:58. Rather,

PG&E merely contended that it read Order No. 2003 to contain

an implied exception for the California ISO, since California had

a preexisting, approved practice under which the PTOs

performed the studies. Id. at 14:20-38. But whether or not it

was possible to read Order No. 2003 as containing an “implicit”

exception, that is hardly a warrant for failing to challenge the

Order’s explicit statement that the studies were to be conducted

by the Transmission Provider.

In any event, Order No. 2003-B makes any notice argument

-- and any argument that the study requirement was a mere

“assumption” -- untenable. That order flatly states that the “ISO

conducts all studies . . . and controls all aspects of the

interconnection process.” Order No. 2003-B, 109 F.E.R.C. at ¶

80 n.25; see id. at ¶ 80 (“[T]he Transmission Owner must agree

to transfer to the . . . ISO control over the significant aspects of

the interconnection process[,] . . . including the performance of

3

PG&E does not argue here that FERC’s refusal to grant its

request for a variance -- an option provided for in Order No. 2003, see

104 F.E.R.C. at ¶ 26 -- was arbitrary or capricious.

12

all Interconnection Studies.” (emphasis added)). Given this

clarity, PG&E’s inadequate notice argument must fail.4

2. PG&E also argues that, even if Order No. 2003-B did

clarify the centralized study requirement, it came too late to

provide adequate notice because PG&E had already submitted

its compliance filings for Order Nos. 2003 and 2003-A by the

time Order No. 2003-B issued. This argument is of little

assistance to PG&E because, as we have just explained, Order

Nos. 2003 and 2003-A themselves provided adequate notice.

Nor is it a persuasive argument even with respect to 2003-B.

Although PG&E filed its initial Order No. 2003 compliance

filing before FERC issued Order No. 2003-B on December 20,

2004, it did not submit its revised compliance filing with respect

to Order Nos. 2003 and 2003-A until January 5, 2005 -- some

two weeks after Order No. 2003-B issued -- and it did not file its

Order No. 2003-B compliance filing until more than a month

after that. Moreover, the Commission did not release the first

order at issue in this case until July 1, 2005. See First Order on

Review, 112 F.E.R.C. at 61,022. PG&E has suggested no

reason why, even if it had not been on notice of the centralized

study requirement until FERC issued Order No. 2003-B, a

4

PG&E also raises a separate notice argument under the notice-

and-comment provisions of the Administrative Procedure Act, 5

U.S.C. § 553. It contends that interested parties were not provided

with notice and an opportunity to comment on a proposal that

interconnection studies must be conducted by the Transmission

Provider, “as no such proposal appeared in the various orders leading

up to the adoption of” Order No. 2003. PG&E Br. 36. This is not just

a collateral attack on Order No. 2003; it is a direct attack. And

because the time for such attacks has long since expired, we cannot

hear it. Moreover, PG&E’s failure to raise this objection with FERC

in the proceedings in this case creates a second bar to our

consideration. See 16 U.S.C. § 825l(b); California Dep’t of Water

Res., 306 F.3d at 1125.

13

challenge to that Order would not have been in time to put its

objections before the Commission.

IV

For the foregoing reasons, we conclude that PG&E’s

petition for review of the orders below is an impermissible

collateral attack on the earlier Order No. 2003 series. We

therefore dismiss the petition for lack of jurisdiction.

So ordered.